Aardvark Daily

Please visit the sponsor!

A reset in the wings?

For decades, the push has been towards creating a vibrant global economy where goods and services cross borders without excessive bureaucracy, tariffs or hurdles.

This, we've been told, is good for everyone.

By creating this almost borderless global economy, everyone gets to maximize the value of their export markets and consumers get cheaper products thanks to the effects of strong competition within markets.

Its a win-win.

However, in recent times we've seen this global economy model crumbling before our very eyes and it could be the precursor to a dramatic economic change that will affect everyone.

Increasingly, the USA seems to have dropped the concept of competing through innovation and has decided to simply impose tariffs on imports so as to protect its domestic manufacturers.

Other countries are also seemingly falling out of love with the concept of a borderless global economy where competition takes place on the basis of "may the best product win".

It would appear that many countries will now have to significantly alter their entire economic structure to focus on supporting domestic industry in a way that makes them financially insulated against overseas competitors.

What does this mean for consumers?

Well it's looking like in many places, especially the USA, we can say goodbye to all the low-cost Chinese tat that has absorbed so many consumer dollars.

Already the US has implemented a wide-ranging set of tariffs against things such as Chinese-made EVs and other items. In some cases even total import bans against China are being proposed, such as in the area of drones.

This can only mean higher prices for US consumers and a dramatically reduced range of options when shopping.

On the up-side, it could see significant stimulous to the economy by way of new jobs created by new businesses set up to fill gaps in product availability. More jobs mean more money in the economy and (perhaps more importantly) more taxes for the government.

A huge downside however, is that without the pressure of competition from outside a nation, its domestic industries run the risk of becoming complacent and inefficient. This will likely result in even more price-hikes and huge inflationary pressures.

For those countries, such as China, which are heavily reliant on massive export volumes, the fallout could also be significant. Although their domestic market is large it is not as large as the export markets they serve so having those doors slammed closed would result in a lot of pain.

I have to wonder whether, in a few short years, we'll be back to the way things were in the 1960s, when even countries like New Zealand made most of the stuff they used. TV sets, washing machines, bookcases, clothes and even cars were all made (or assembled) here, rather than simply imported from countries that could make them far cheaper and more efficiently.

If you wanted to import something back then it wasn't easy. Not only was there no online shopping to assist you in finding a source for the product you wanted but odds are that you'd need to have your own "overseas funds" and obtain an import license from the government. Once this was done you'd still be stung with a hefty amount of tax at the border. All of these measures provided massive protection for domestic manufacturers.

Who knows, such things could be in our future yet again. Could this all be a huge economic cycle that is about to repeat?

One has to ask... which is the better option?

Should we have a world where borderless free trade allows us to get the best products at the lowest prices, albeit at the cost of significant shipping activity that damages the ecosphere and the risk of things such as forced labour in some countries?

Or would we be better off going back to those mid-20th-century ideals where, as a nation, we try to be as self-sufficient as possible and as a result, end up with 100 percent employment but a dramatically lower standard of living?

Something to contemplate.

Carpe Diem folks!

Please visit the sponsor!

Here is a PERMANENT link to this column

Rank This Aardvark Page

Change Font